The Role of Social Connectedness: Evidence from Mergers and Acquisitions

Giang Nguyen (), Hannah Nguyen () and Hung Pham ()
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Giang Nguyen: Faculty of Political Science and Economics, Waseda University 1-6-1 Nishi-Waseda, Shinjuku, Tokyo 169-8050, Japan
Hannah Nguyen: Department of Banking and Finance, Monash University Caulfield East, Victoria 3145, Australia
Hung Pham: Department of Banking and Finance, Monash University Caulfield East, Victoria 3145, Australia
Authors registered in the RePEc Author Service: Thu Ha Nguyen

No 2116, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: Using a comprehensive dataset of social network ties between U.S. counties, we document higher announcement returns for acquirers that are more socially proximate to their targets. Our findings are robust to the inclusion of geographical proximity and withstand endogeneity concerns. Consistent with the information asymmetry hypothesis, we show that the effect of social connectedness is more pronounced when targets have high information opacity, as proxied by target status, analyst coverage, bid–ask spreads, R&D, and high-tech classifications. In addition, social connectedness lowers advisory fees, reduces deal premiums, and yields better acquirer long-term performance.

Keywords: Social connectedness; merger and acquisition; information asymmetry (search for similar items in EconPapers)
Pages: 69 pages
Date: 2021-09
New Economics Papers: this item is included in nep-com, nep-fmk, nep-isf, nep-soc and nep-ure
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Citations: View citations in EconPapers (1)

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